BMI projects brent prices to hover around $80 this year

BMI, a Fitch Solutions company, has projected that the price of London Brent crude will hover on average around $80 per barrel this year.

In its report published last week, BMI said its projection indicates a slight uptick to $83 per barrel in both 2024 and 2025, followed by a return to $80 per barrel in both 2026 and 2027.

The comprehensive report also includes insights from the Bloomberg Consensus, where BMI is a notable contributor. The Bloomberg Consensus suggests that Brent crude oil is expected to average $82 per barrel in 2023, $85 per barrel in 2024, $82 per barrel in 2025, $79 per barrel in 2026, and $67 per barrel in 2027.

The recent surge in oil prices during the third quarter has been attributed by BMI analysts to seasonally higher demand, Saudi Arabia’s unilateral cutbacks, and declining Russian exports.

“As anticipated, oil prices have strengthened heading into the third quarter, supported by seasonally higher demand, unilateral cutbacks by Saudi Arabia, and weakening Russian exports,” BMI analysts noted in the report.

“In fact, the market balance has been progressively tightening over the course of the year, spurred by ongoing increases in oil consumption, supply disruptions among key producers, and renewed cuts by OPEC+,” the analysts added.

“However, the oil markets have been dominated by bearish macro sentiment, which has previously prevented a pass-through to prices,” the analysts continued.

Read also: Oil prices inch up in early Asian trading amid mixed market signals

Throughout the year, the market balance has progressively tightened due to increased oil consumption, limitations on supply among major producers, and renewed cuts by OPEC+.

Oil prices face challenges amid negative market sentiment, but analysts foresee support in the third quarter, followed by a softening in the fourth quarter and the first quarter of next year.

The analysts are optimistic that the ongoing economic downturn will bottom out, leading to a boost in global trade flows and a positive market outlook in the years ahead.

However, they also acknowledge the fall of global economic activity and anticipate short, shallow recessions in both the eurozone and the U.S., which could impact oil demand and evoke negative market sentiment.

When it comes to supply, BMI analysts highlight an ongoing tug-of-war between tight production constraints in OPEC+ countries and robust output gains among non-OPEC producers.

Notably, OPEC+ has extended its 1.16 million barrels per day production cut until the end of 2023 and has committed to maintaining the deal until December 2024.

Furthermore, Saudi Arabia’s unilateral one million barrel per day cut and export declines in Russia are pushing the market further into a decline in production. However, considerable production growth is being observed in regions like the Americas.

“However, the U.S. will continue to add substantial volumes next year, compounded by rising supply across various other markets, including Brazil, Guyana, Canada, Mainland China, Kazakhstan, and Norway,” they added.

However, various market reports from different sources offer different projections for Brent crude oil prices in the coming years. While BMI expects a relatively stable trend with occasional fluctuations, other research firms, such as Standard Chartered and BofA Global Research, are more optimistic in their forecasts.

Aligning with BMI’s expectations, the short-term energy outlook from the U.S. Energy Information Administration foresees moderate price increases in the years ahead.

As the oil market remains influenced by a multitude of factors, accurate predictions continue to be a challenging endeavor for experts and analysts alike.